06/12/2021

THAILAND DAILY

NEWSPAPER / MAGAZINE / PUBLISHER

father-son-fight-knocks-shares-of-chinese-meatpacker-wh-group

Father-son fight knocks shares of Chinese meatpacker WH Group

HONG KONG — Mudslinging between the chairman of WH Group and his son drove off investors from the world’s largest pork producer on Wednesday.

Shares of Hong Kong-listed WH sank 11.3% to HK$5.95, wiping out 11.2 billion Hong Kong dollars ($1.44 billion) of market value. Core subsidiary Henan Shaunghui Investment and Development shed 5.5% to close at 26.29 yuan in Shenzhen, ceding 5.33 billion yuan ($823 million) in value.

What sent investors squealing was an accusation-filled statement published on Chinese social media platform Weibo on Tuesday night by Wan Hongjian, a son of WH Chairman Wan Long who was abruptly ousted from the company’s board and management in June over “misconduct of aggressive behaviors against the company’s properties.”

The response from Hongjian, entitled “Father and Wan Long in My Eyes,” alleged the chairman had committed fraud and tax evasion and mismanaged company funds, but indicated that succession issues sparked the falling out.

Wan Long, 81, yielded his position as chief executive of WH last week in favor of longtime lieutenant Guo Lijun, previously chief financial officer.

Hongjian, who had been deputy chairman and vice president of WH, said he told his father in early June that despite Guo’s long tenure at WH, he still lacked firm understanding of the company’s production and sales operations and also that he had incurred losses with misplaced foreign currency hedges, factors the son felt should weigh against promoting him. 

“Even before I opened my mouth, the strongman started to violently rage, and the talk turned into curses,” Hongjian said of his father.

Domestic media earlier reported that Hongjian also became furious during the conversation, damaging a door with his fist and banging his head on a glass cabinet, leading to WH’s June 17 announcement about his “aggressive behavior.”

In his statement, Hongjian said his father secretly received a 5% stake in Shuanghui from another shareholder in 2007 and then sold it to a Hong Kong company for $200 million, without disclosing either transaction to tax or market authorities or other shareholders.

More recently, according to Hongjian, his father made a strategic mistake in overruling Shuanghui managers by insisting on importing 100,000 tons of frozen U.S. pig carcasses in February, presumably from WH subsidiary Smithfield Foods. The costly purchase inflicted an 800 million yuan loss on Shuanghui, Hongjian claimed.

“It has turned into a huge hidden loss, while a big pile of cash has flown across the Pacific Ocean to the U.S.,” he said, claiming the pork still sits in a Shuanghui warehouse.

In a statement issued Wednesday afternoon, WH denied all of Hongjian’s claims.

“The board would like to clarify that the allegations are untrue and misleading,” added that it “reserves its right to take legal action.”

WH did not respond to requests to speak with Guo and Wan Long.

On a call with reporters last week, Wan said that Guo’s promotion was “very appropriate” given his long experience with the company and that the management changes were “our normal work adjustment.”

The same day, the chairman named Wan Hongwei, Hongjian’s younger brother, as WH deputy chairman. Hongwei was already vice chairman of Shuanghui and served as assistant to the chief executive while his father held that role.

Wan Long controls 23.33% of voting rights in WH while Guo owns a 5.13% stake. WH’s shareholding disclosures do not mention Wan Hongjian.

At WH’s annual general meeting on June 1, a quarter of the shares cast was against the reappointment of Wan Long as director. Less than 10% voted against Hongjian.

Citigroup analyst Xiaopo Wei said in a note to clients on Wednesday that he believes the company “has been following guidelines with reference to prevailing market prices to avoid conflict of interest” with its meat imports and applauded the new executive lineup as “relieving the market’s recent concerns on the uncertainties of its management transition.”

Wei, who has a “buy” rating on WH, said “the market has been over concerned about the impact of [Hongjian’s] allegations” on a $1.9 billion share buyback offer that stockholders approved on Monday.

Additional reporting by Cora Zhu

Comments

be the first to comment on this article

Leave a Reply

Your email address will not be published. Required fields are marked *

Take Me Top